All this means is what is the likelihood you are to pay back your credit obligations you agreed upon.

If you have missed a payment, have large amounts of debt or open new lines of credit in a short period of time, you can negatively impact your credit score.

Your mortgage lender will request a credit report from one of three major credit bureaus. Any of the three will send your lender your most recent credit report which will contain the following information:

Payment history

Amount of debt

Length of credit

New credit

Variety of credit

Lenders factor in other information as well, but, credit scores can impact the type of loan underrates you can qualify for.

However, the higher your credit score, the better the mortgage rate.

Nothing in life is ever perfect, which is why the need to have a perfect credit score is false.

There are different loan options available to accommodate to those who have lower or higher credit scores.

All of this information is required during the pre qualification process, so your lender can appropriately determine your eligibility for a particular loan.

Myth #3: Mortgage payments should equal to 28 percent of your income

Paying monthly mortgage payments should be based off what you are most comfortable with.

It does not need to meet a specific percentage because every mortgage is handled differently.

There are other expenses that need to be covered in addition to your mortgage payments, such as other regular monthly expenses like utilities and electricity, maintenance costs and debt you already owe, like credit card or car loans.

Basing what you can afford monthly should not be calculated based off your income necessarily, but more on how much you spend comfortably, while managing other expenses.

If you want to start tracking and budgeting your money so you can see how much you can afford monthly, you can use online resources, such as:

Myth #6: It’s always better to own than rent

It has been proven that owning a home can offer different advantages that you can;t get with renting.

For example, homeownership gives people privacy from neighbors, luxurious space, ability to build equity and freedom to do what you want with the property.

Renting on the other hand, gives people reassurance their landlord will handle all maintenance issues, it is a short term commitment and no costly down payment is required. Renting also sometimes offers some “free” amenities, such as access to a pool or gym.

Not only are the living circumstances different, but how it is financially managed differs too.

Depending on your financial situation and what your current aspirations are can help determine whether it is better to own or rent.

Only you can decide whether the benefits of owning or renting will financially and physically benefit you.

Myth #7: You can compare mortgage rates based off their advertisements

The main purpose of an advertisement is to capture people’s attention with a straightforward message.

Mortgage lenders in particular, have perfected this art.

They continuously draw people in by advertising their low mortgage rates. Prospective buyers are always in the market for good deals as financing a home is one of the biggest investments of their lives.

Which is why lenders across the board are marketing low rates to gain business.

Sure, lenders may actually have low rates, but what they aren’t advertising is the other fees and charges that will require borrowers to pay.

Be sure to pay close attention if lenders are advertising interest rates or annual percentage rates (APR).

These rates can include other fees and mortgage points, which are fees paid directly to the lender at closing in exchange for lower interest rates.

Regardless, all mortgages have different fees and costs.

It is extremely important to compare all lenders and familiarize yourself on their mortgage rates, so you can make the best decision possible.